Q1 2022 EnPro Industries Inc Earnings Call
Hello, and welcome to the MRO first quarter 2022 earnings call and webcast. At this time all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to turn the call over to James Gentilly, Vice President of Investor Relations. Please go ahead James.
Thank you, Kevin and good morning, everyone and welcome to <unk> first quarter 2022 earnings Conference call I will remind you that our call is being webcast at <unk> industries Dot Com, where you can find the presentation that accompanies this call with me today is Eric Vaillancourt, our President and Chief Executive Officer, and Milt Childress executive.
He is president and Chief Financial Officer.
Before we begin today's discussion a friendly reminder, that we will be making forward looking statements on this call that are not historical facts and that are considered forward forward looking in nature.
These statements involve a number of risks and uncertainties, including impacts from the pandemic and related governmental responses and their impact on the general economy as well as other risks and uncertainties that are described in our filings with the SEC, including our most recent Form 10-K also during this call we will reference a number of non-GAAP financial measures.
Tables reconciling these measures to the comparable GAAP measures are included in the appendix to the presentation materials, we do not undertake any obligation to update these forward looking statements.
Please note that during this call we will be providing full year guidance, which excludes changes in the numbers of shares outstanding impacts from future acquisitions dispositions and related transaction costs restructuring costs incremental impacts from inflation geopolitical variables, including the conflict in Ukraine.
Sanctions and trade tensions on market demand and costs subsequent to the first quarter.
The impact of foreign exchange rate changes subsequent to the end of the first quarter increases in interest rates differing from assumptions outlined in guidance impacts from further spread of COVID-19, or other variants and environmental and litigation charges. It's my pleasure to turn the call over to Eric Eric.
James and good morning, everyone. Thank you for joining us today, as we provide a strategic and financial updates for our first quarter of 2022.
2022 marks our 20 <unk> anniversary as an independent public company over.
Over the last two decades, thanks to the hard work and dedication of the <unk> protein. We have built a strong foundation for sustainable growth and value creation.
As we charge forward, our enhanced cash flow models will enable us to continue to drive organic growth investments.
<unk> in our key end markets and selectively pursue acquisitions that fit our strategic and financial criteria.
I am proud of how far we've come and I have never been more excited for the future of outgrowth in all of our stakeholders.
Now onto our first quarter highlights.
Our team's agile execution produced strong results in our first quarter, despite significant inflationary pressures geographical uncertainty and resulting global macroeconomic headwinds I would like to thank our entire team for their hard work resilience and flexibility under challenging circumstances, as we continue to deliver to our customers and all of them.
Stakeholders.
I am, particularly excited about the opportunities arising from our acquisition of Nex edge as we are already realizing the significant benefits of combining the commercial and technological advantages across our advanced surface technologies platform.
Our teams are coordinating closely and the combination of demonstrating solid strategic and cultural fit.
For the quarter, we delivered strong top line result, with organic sales growth of 13, 5% with demand for our products and services largely broad based.
Amid a challenging environment, our supply chain operations and commercial teams continue to collaborate to secure supply improve processes and pursue pricing actions to offset rising material costs freight and labor costs across the company.
The inflationary environment also continues to present headwinds, particularly on our heavy duty truck market and the sealing technologies segment and in our automotive exposed markets in the engineered materials segment. We expect these conditions to persist through at least year end and we continue to explore opportunities to mitigate these headwinds with pricing sourcing and continuous.
<unk> improvement.
Our portfolio optimization strategy has elevated the profitability of the entire enterprise and has empowered our colleagues to execute on our value creation objectives with purpose and close collaboration.
Our first quarter adjusted EBITDA of $67 9 million increased 36% year over year largely due to contributions from next edge. His first full reporting quarter and adjusted EBITDA margin expanded 210 basis points to 27%.
I would like to point out that this is the first time in our 20 year history that our quarterly adjusted EBITDA margins exceeded 20%, which marks a tremendous milestone for our company just a short time ago. In 2019, we finished the year at 14% adjusted EBITDA margin. This achievement is a testament to the resilience of our operating model and the steps we have.
Taken to create a stronger more focused profitable portfolio.
Our 2022 sales growth and adjusted EBITDA guidance, we are reiterating today implies adjusted EBITDA margins north of 20% for the full year.
From a strategic perspective, we remain focused on niche high margin materials science related businesses with strong cash flow and robust aftermarket exposure.
We are developing market, leading leadership positions in higher growth markets that are supported by secular tailwind as we lean into our most profitable opportunities.
We continue to leverage our time tested process improvement initiatives to preserve and increased margins and cash flow return on investment.
While maximizing long term shareholder returns through our commitment to sustainability and diversity disciplined capital allocation and transparency.
Now my pleasure to hand, the call over to Milt for a deeper dive into our first quarter results and outlook for the balance of 2022.
Thanks, Eric and good morning, everyone.
As Eric stated, we had another good quarter, even as aggressive inflationary forces persisted and geopolitical issues in Ukraine drove macroeconomic uncertainty and supply chain variability globally.
Reported sales of $328 $7 million in the first quarter increased 17, 7% year over year and as Eric mentioned 13, 5% organically.
Positive momentum in the semiconductor general industrial heavy duty truck aerospace food and pharma oil and gas and petrochemical markets as well as the first quarter contribution from next edge.
Drove sales growth, partially offset by the reduction in sales due to last year's divestitures as well as the continued lag in our automotive market residing in the engineered materials segment.
Due to supply chain related customer delays.
Adjusted EBITDA of $67 $9 million increased 36% over the prior year period, driven primarily by the addition of next edge <unk>.
Net of the impact of divestitures completed in 2021.
Operating leverage on organic sales growth and strategic pricing initiatives in the quarter were largely offset by increasing raw material costs rising labor and freight expenses. Despite.
Despite these inflationary headwinds we delivered adjusted EBITDA margin of 27% an increase of approximately 210 basis points compared to the first quarter of 2021.
Corporate expenses of $13 4 million in the first quarter.
2022 increased from $11 $6 million, a year ago, driven primarily by cost incurred from recent acquisition and divestiture activities as well as corporate restructuring charges, partially offset by lower incentive compensation accruals.
Adjusted diluted earnings per share of $1 83 increased 33, 6% compared to the prior year period, driven by the acquisition of Nex edge and solid demand year over year, partially offset by higher interest expense and inflationary forces experienced largely in our heavy duty trucking.
Motive markets, where price initiatives lagged.
Moving to a discussion of segment performance sealing technology sales of $153 6 million increased four 8% driven by strong demand in heavy duty truck food and pharma aerospace and general industrial markets.
Partially offset by the impact of the divestiture of the polymer components business completed last year.
Excluding the impact of divested businesses and foreign exchange translation organic sales increased 14, 1%.
For the first quarter adjusted segment EBITDA of $33 $5 million was essentially flat compared to the prior year period.
Adjusted segment EBITDA margin contracted 130 basis points to 21, 8% due primarily to increased inflationary pressures on raw materials and higher freight and labor costs, particularly in our heavy duty truck business. These.
These cost pressures were partially offset the operating leverage from strong volume and price increases.
Excluding the impact of divestitures and foreign exchange translation adjusted segment EBITDA increased six 2% compared to the prior year period.
Turning now to advanced surface Technologies' first quarter sales of $116 $7 million more than doubled drill.
Driven by contributions from next edge and continued strong demand in our semiconductor market.
Excluding the impact of the <unk> acquisition and foreign exchange translation.
Sales increased 19, 6% versus the prior year period.
For the first quarter adjusted segment EBITDA more than doubled to $34 $9 million driven primarily by the next edge acquisition and strong organic sales growth.
Splitting the impact of next edge and foreign exchange translation adjusted segment EBITDA decreased three 5% due to increased operating expenses supporting the development of advanced optical filter applications and growth investments in semiconductor supporting capacity expansion in both the.
United States and Taiwan.
In addition results were impacted by product mix and wage increases ahead of price adjustments.
Qualification work with various large semiconductor customers focused primarily on advanced node applications is ongoing and we are optimistic that we will continue to see strong demand in our semiconductor related businesses into the foreseeable future.
We are very encouraged by the outlook for advanced surface technologies.
In engineered materials.
First quarter sales of $59 million decreased 26, 6% compared to the prior year, driven primarily by the CPI divestiture and industry wide supply supply chain related constraints affecting production in the automotive market.
Partially offset by stronger demand in general industrial aerospace and oil and gas markets.
Organic sales for the quarter increased six 5%.
First quarter adjusted segment EBITDA decreased 27% over the prior year period, driven primarily by the CPI divestiture.
Excluding the impact of the divestiture and foreign exchange translation, adjusted EBITDA decreased 4% compared to the prior year period, reflecting raw material cost wage and freight.
Headwinds in excess of pricing initiatives, particularly in the automotive market.
Turning to our balance sheet and statement of cash flow.
We finished the quarter with 1.7 hundred $8 billion in total debt and cash of $293 million.
In the first quarter, we repatriated $43 million in cash from foreign jurisdictions.
With further tax efficient repatriation efforts underway, we expect to bring an additional $125 million onshore by year end.
At March 31, we had $259 million available for borrowing under our revolving credit facility at.
Our balance sheet remains healthy and we have ample financial flexibility to execute on our strategic growth initiatives.
Free cash flow for the first three months of 2022 was $27 million up from $14 million in the prior year, driven primarily by higher operating profits improvement and working capital management and lower capital expenditures.
We plan to use excess free cash flow to fund the growth investments and reduce debt.
During the first.
Quarter, we paid a <unk> 28 per share quarterly dividend and for the first three months of the year dividend payments totaled $5 9 million.
Representing a three 5% increase versus the prior year.
Turning to guidance, we are reiterating our expectation for low double digit revenue growth for 2022 over reported 2021 sales of $1 4 billion.
And we continue to expect adjusted EBITDA in the range of $263 million to $275 million implying.
Implying adjusted EBITDA margins north of 20% for the full year.
Based on our current outlook, we expect adjusted EBITDA to be waited fairly evenly between the first half and second half of this year.
Okay.
We are modestly revising our adjusted diluted earnings per share guidance to a range of $6 60 to $7 15.
To reflect increased projected interest costs above our prior assumptions due to the expectation for acceleration of interest rates as the year progresses.
Underlying demand and order trends remained strong into the second quarter, and we will remain agile with pricing sourcing and operational improvements to mitigate impacts from the currently dynamic inflationary and macroeconomic environment.
Now I'll turn the call back to Eric for an update on our ESG initiatives, followed by some closing comments.
Thank you Bill we are committed to a strong environmental social and governance practices to support our objective to create a more sustainable future for our communities and foster a culture that embraces diversity champion safety and empowers our teammates we established ourselves as a dual bottom line organization many years ago focused both on.
On enterprise level of profitable growth and professional and personal development for our colleagues.
These efforts are underpinned by our three timeless values of safety excellence and respect.
Stewardship of our core values and sustains our culture daily and is reflected in the ways. We worked together engage with our communities customers and shareholders and suppliers.
In 2022, I am pleased to share our five key initiatives to further our ESG related framework.
One build a comprehensive climate action plan, including collecting our energy water and waste usage of our manufacturing facilities and working towards calculated your greenhouse gases baseline by yearend to further our efforts on diversity and inclusion three continued enterprise wide ESG training and increased.
Communication.
For integrate ESG topics into and pro risk management approach and five integrate ESG considerations into product and lifecycle management.
Our ESG initiatives are supported a monitored monitored by the board of directors as our multifaceted multiyear framework is implemented.
We expect to report progress to all of you on these initiatives on a regular basis.
We start 2022 on solid footing with our teams navigate challenging macro economic conditions.
As a leading industrial technology company, we will continue to invest in our portfolio of businesses that enjoy secular tailwind technological differentiation strong recurring revenue streams and solid cash flow returns, while safeguarding critical environments with compelling products and services for our customers in each of our businesses.
And our 20th anniversary as an independent public company. We are building upon our strong foundation as we continue our transformation and leaned into our best growth opportunities across the company.
With the sustained benefits of our portfolio reshaping actions and our cultural and economic differentiation I am proud of how far we have all come and incredibly excited for the future.
Future and grow as bright thank you for your time today and I'll open the line to questions.
Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
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First question today is coming from Jeff Hammond from Keybanc capital markets. Your line is now live.
Hey, good morning, guys.
Good morning, Jeff.
So just trying to get a better sense on what is holding back raising the revenue or EBITDA guide. It seems like first quarter very strong start and certainly it sounds like business momentum has continued into Q.
Yes, Hey, Jeff.
Yes, we had we did have a good first quarter relative to expectations coming into the year. So the year got off to a little faster start we're seeing.
Some just concerns from the global economy, you are reading the same thing that we are.
With GDP growth.
Globally being reduced on a couple of occasions.
Coming down in the U S also not not just globally. So we think it's a little early in the year to be.
Adjusting our guidance, even though we had strong first quarter. So that's that's really our thinking.
We feel like we'll know more when we get three months from now and we are on our call talking about our Q2 earnings we feel like we will have a little better at that our outlook for the balance of the year seeing how the economy develops.
Okay.
On ceiling Tech I just wanted to.
I know you talked about kind of this transitory dynamic with.
Truck and getting price so I'm, just trying to get a better sense of.
How are you thinking about margin cadence sequentially into <unk> as some of that pricing comes through and if you think margins.
All in for sealing tech can hold flat for the year.
It's Erik Jeff I, do think margins will hold flat and maybe even improve throughout the year and ceiling.
Challenges, we just implemented a price increase March one that took effect may one we have about a 60 day backlog as well and so we have to work through the backlog before you start to see that price increase will start to realize that towards the end of the second quarter somewhere it will start to filter in middle of May and continue on and build more towards <unk>.
July so we will see momentum in price throughout the year.
And I expect us to finish a flat or slightly even ahead than where we were.
We will also have some cost.
Costs that continue to come back into the company as travel picks up.
So I mean overall, Jeff I would say.
We're expecting our EBITDA margins as a company to to hover around that 20% Mark through most of this year.
Yes.
Okay, and then just last one on Asps.
It looks like you had some added investments around Alexa in for the semi expansion I am just wondering if if those continue through the year it looks like.
If you kind of back out.
And that said the margins were maybe a little bit lower than the prior year run rate for the base.
Yes, if you exclude next edge Youre right, Jeff we did have some.
Margin contraction and and it was really attributable to several factors we are investing in growth. So it's a good news story.
There are some operating cost capital cost there.
<unk> are associated with investing for growth not only capacity, but new product development. So that's one thing and we saw that really across the board.
Across the board in the segment in the optical Phil Phil filter business, we saw it.
And semiconductor as we continue to.
Ramp up for the three nanometer launch, which by the way is going well there is positive momentum there and we expect that to.
To pick up.
As the year progresses, which will have a beneficial impact on on.
On margins.
And earnings growth in the segment and then we also have some ongoing investments that we're making too.
Prepare for the ramp up that we expect.
In the United States.
In the coming years, and we're continuing to get the new building the new capacity in Taiwan.
Up to full speed as well, so theres ongoing growth, but it's all what I would call have a good news story, we're adding expense here in advance of growth that we are very confident about is the team. That's a big part of it now we did have some some mix.
Product mix that affected the margins a bit we had.
Some cost pressures, even though the cost pressures are more evident.
In the ceiling segment and the engineered segment.
We did have some cost pressures ahead of some pricing initiatives, but.
Overall, we are very very positive about the future and the balance of the year for ASE.
Okay, great. Thanks, guys.
The thing I would mention.
Specifically, if you look at <unk>, we had very strong quarter. It was kind of a.
High watermark in Q1 of last year, so there's a little bit of a year over year comp that we see there you're seeing a couple of other places in the company to you saw it in engineered because we had a very strong first quarter last year as automotive rebounded sharply from the pandemic low.
So thats a little bit of a theme this quarter two compared to last quarter.
Thank you. Our next question is coming from Steve <unk> from Sidoti. Your line is now live.
Good morning, everyone.
Milt you talked a little bit about economic headwinds. So I just wanted to get a sense after a very strong quarter and I think the one area.
You noted weakness was automotive, but that's really on the supply side that is demand. So I'm just trying to get a sense. Even anecdotally are you seeing any kind of economic headwinds that are impacting demand from customers at this point.
The short answer is our backlogs are still really strong at the same time, if you look at spot truck rates starting to drop we have dropped I think as much as 20 or 30% in the last few weeks and that's usually a leading indicator of what the economy could be doing.
And so we remain optimistic about our business is at the same time there are some indicators that things are slowing.
Steve just as an example, the last forecast I saw for GDP for the U S. For 2022 has now dropped to two 5%.
You saw it this weekend now that's not across the board from all sources, but it's just the indicators the spot rates, it's more of the global economic indicators that are affecting us.
Our decision to hold guidance. Despite the fact that we had a good first quarter.
No completely understandable I just wanted to get a sense at this point if you are actually seeing it yet.
And the answer it sounds like not yet.
The backlogs are strong and.
We're watching order patterns and we'll continue to.
To to watch that so.
We spent a lot of to a good bit of tab in our company with our commercial team with our supply chain team.
Watching the indicators, but things were generally favorable as we see them right now.
Okay.
And then Capex was pretty low this quarter.
One I guess the question would be on what Youre expecting for Capex. This year and then also given what based on your guidance another strong year projected for free cash flow.
At what point would you consider returning cash to shareholders or do you still see a really healthy M&A pipeline out there.
Yes, that's a good good questions capital spending was lower than we would've expected in Q1, and we chalk that up to Covid.
Labor.
Being out, especially early in the quarter and and that made it challenging to move forward with certain projects that are planned for the year.
At this point in time, we were.
We stick with the three to three 5%.
Capital spending for the full year and that did that as we've said previously that does not include investments that we may make to support.
Onshoring of chip production in the U S. So we'll provide more guidance on that.
Investment.
Yes, as the year progresses.
In terms of free cash flow, yes, we expect to have good free cash flow year.
Got it.
It's likely that we will have some capital that we'll be spending to support the SME growth in the U S. As I mentioned, we will talk more about that as the year progresses.
So outside that and outside perhaps.
We've disclosed previously.
<unk>.
Various environmental matters and progression on environmental matters, specifically with.
Safe River and.
And so we expect there could be some cash outflow to bring that.
That situation to full resolution as the year progresses, but other than that if you exclude those two items, we would expect free cash flow for the year to be about equal to adjusted net income for the year.
So.
<unk>.
Thats favorable and I think our cash flows is more predictable with our the portfolio of companies that we have today versus what we had a few years ago.
Alright.
In terms of the use of that capital that cash right now.
Focus is paying down debt, we wanted to reduce our leverage and then we also want to.
We want to use some of our capital for ongoing investment we have organic growth investments to support and we could have some inorganic opportunities that fit our strategy as the year progresses. So thats our primary primary.
Our expectations with a primary use of cash this year.
Great.
I appreciate all the color. Thanks.
Thanks, Steve.
Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Ian Zaffino from Oppenheimer. Your line is now live.
Alright, great. Thank you.
Just wanted to maybe touch upon the pricing environment, a little bit more are.
Are you bumping into any.
But let's say elasticity and also you know as far as pricing are you able to.
Go back into the backlog and be priced backlog or is most of the price action you take just on new orders.
I don't think we're bumping into elasticity in general pricing actions are going through and customers are supportive to more around demand and they wanted to make sure. They get what they have on order, we arent really able to reprice the backlog at the same time, we do limited. So we're limiting it to for an example, if we get 60 days notice to eliminate customer.
Dubai.
And average usage for that 60 day period, so that they can't take advantage of a longer runway than what's really exist. So.
So we do limited in that regard.
Sure.
I'm not sure.
Does that complete room I'm.
Im not sure I missed part of the question.
No that was the question and that is helpful. Thank you.
And then maybe for milk.
On the debt stack.
What's the sensitivity now as far as interest rate increases.
Two interest rate I'm.
Im sorry interest expense increases.
How much again is fixed versus floating I know you broke it out a little bit but.
Could you remind us again, thanks, yes, we're roughly 35% fixed 65% floating.
Roughly.
<unk>.
We do expect we've changed our assumption as I noted earlier in the prepared remarks, we've adjusted our assumption on interest rate increases from where we were a quarter ago just given.
All of the expectations in the markets and so we essentially now have.
We have 450 basis point.
<unk> in our model, but one of them is at the end of the year that doesn't really affect this year. So in essence, we have.
350 basis basis points improvements and.
Increases and if the economy slows and the fed decides I think it's almost a certainty that we'll see a 50 basis point.
Our increase in May.
And then depending on what happens to the economy, it could be less than that but we will adjust our.
Our model as we know more.
Alright, great. Thank you very much.
Yes, thanks Ian.
Thank you. Your next question is coming from Justin Bergner from Gabelli funds. Your line is now live.
Good morning, Eric Good morning, Mel Good morning, James.
Good morning, Yes, Hi, Justin.
Nice start to the year.
My first question.
It relates to the general drivers of the outlook.
Kept your adjusted EBITDA guide unchanged, but you're noting.
More material investments advance surface technologies at least.
In terms of the.
Specifics youre sharing in your press release and presentation today is it safe to assume that within your adjusted EBITDA Guide, which has stayed the same that maybe there is a slightly better revenue outlook, but then slightly higher expenses.
Associated with investment advanced surface technologies or was this sort of always envisioned to be the plan.
Yes, I think the way the best way I would describe adjusting it's fluid and.
It's always moving its always adjusting we know a little bit more now than we did three months ago.
On how some of the gross growth investments would would develop throughout the year I do think it's safe to say that we have baked into our guidance a little bit more specificity.
Then we had a quarter ago on the impact and so yes. There are some expenses that we're baking into our guidance that we just did not have clarity on a quarter ago. The same thing will be true next quarter.
Whatever wherever we end up with on our guidance it will take into account our latest thinking there but it's.
It's a good good question because.
Yes, there are some additional expenses incorporated.
Into our outlook for the year for those growth investments.
Okay. Great. That's helpful and are these growth investments, mainly a 2022 phenomenon or would you expect them to.
I mean, I guess outside of the.
The U S semiconductor.
Capacity expansion I mean would you expect some of the growth investments this year in advance surface technologies to to continue into next year.
Well you hit the big one the big one that we're expecting as to what's happening in the U S. In the semiconductor industry. So.
If you exclude if you exclude that then out of the way I would describe it as.
We'll always be investing in growth ahead of the growth. So there's always going to be some element of that it just happens to be a little bit more significant given where we are currently in this segment. So I.
I think thats the way I would describe it.
Okay, Great that's helpful and switching back to costs.
How would you describe.
Where we stand today, the relative headwinds associated with the three major cost components inflationary cost of materials labor and freight and how has that view.
Those different headwinds maybe evolved over the last three months.
Well I'll just add context and then.
And then I'll invite Eric to jump in.
And I will give you a little walk through from where we were last year last year, we had really good experience more than covering cost increases during the first half of the year.
And then in Q3.
We still were find Q4, we were we were it was became a little bit more challenging and then I would say in this quarter.
<unk> was more significant overall, because we are seeing we're seeing not only material cost increase but we are seeing the effects of.
Of of wage increases and <unk>.
Continued freight increases.
Now with what's going on in China, and the ports being locked up and what's happening in Ukraine.
We think.
It's likely that those pressures will continue to affect the economy, which is one of the reasons why we have not adjusted guidance as I mentioned earlier.
So that's kind of a little bit of a.
Look back at last year, and then the trends this year.
If you think about it this way we implemented price increases in January one and heavy duty truck market. We did it again in March and we have another one announced for June one and the rest of our businesses July one so.
So I think we've caught up in general other than the heavy duty truck market I think were caught up now as long as things don't go Crazy again in the next quarter or.
The other thing Thats happening is a smaller effect there is just a little bit more inefficiency and it's really just due to supply chain.
Things arent available you're not as efficient as you were before so you're moving moving around the plant more often naval.
Haven't lines larger runs or things like that so there is a little bit of inefficiency. That's piled in there it's not price, we're trying to capture that as supply chain improves that will improve as well.
Great that's very helpful color.
One last question you called out corporate expense being up and I wasn't sure. If you were trying to suggest this is sort of a new higher run rate or that you were trying to suggest it's not a new higher run rate.
Then in the description you mentioned acquisition divestiture expenses and restructuring expenses, but I thought that's not.
Not part of corporate in your adjusted EBITDA calculation, so just any clarity there.
I'll take the last question first because its a good question and can create some confusion so corporate expenses. When we report we report to get the total number and <unk>.
It is correct that the M&A portion.
That that goes into corporate expenses that resulted in some increase year over year is adjusted out for adjusted EBITDA, but when we talked about corporate expenses, we're talking about all expenses.
So we did not exclude.
That for that specific purpose.
So.
Does that is that clear.
Justin Yes that is clear, okay, alright and.
And then we did have we cited some.
Restructuring charges at the corporate level as we reduced some of our overall head count and expenses in conjunction with some of the stranded costs from the divestiture activity, particularly CPI.
And.
So we had an opportunity to adjust our cost structure a bit I would say, it's on the margin, but a bit that made sense.
Well that resulted in.
And some restructuring charge there once again that restructuring charge.
Is excluded from adjusted EBITDA, but is included for purposes of talking about overall corporate expenses.
Great. Thank you.
Thank you we reached end of our question and answer session I would like to turn the floor back over to James for any further or closing comments.
Thank you for your time this morning have a great rest of your day.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.